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It's only natural in the stock market to take a look at portfolio performance and give winners more room to run, especially in the middle of a broad, record-setting rally.
It's tempting at times like these to feel a little warm and fuzzy about your holdings... but I'm here to tell you, whether stocks are going up like a bat out of hell or tanking, don't fall for it.
Save the feelings for long, leafy walks and family dinners.
I've been watching one stock rise recently on heavy buying and strong sentiment about the sector; it's a popular, nearly ubiquitous name; a 170-year-old American classic.
Dump it now...
The Glory Days Were a Long Time Ago
I'm talking about Western Union Co. (NYSE: WU). Western Union got its start in the 1850s as a telegraph company - a quintessential 19th-century disruptor that was critical for shrinking the absolutely mind-boggling physical size of the United States and, ultimately, the globe.
This company was an early Wall Street darling and blue chip, and by the 1890s it was a part of Charles Dow's stock average - that's Dow, as in "Dow Jones" - the precursor to the Dow Jones Industrial Average. It operated more than 1 million miles of telegraph lines and two undersea cables. Later, it operated telex services, and by the 1970s, the company had its own constellation of communications satellites in orbit.
By the mid-1980s, though, the company was in trouble, and it spent the next few decades being handed off and handed off again by a series of slick "Masters of the Universe" - Wall Street Wizard types who restructured, rebranded, and leveraged the company six ways from next Tuesday to the extent that, by the start of the 2000s, the telecom segment was gone and the company was focused on financial services, specifically money transfers, used largely by the un- and underbanked and immigrants sending money abroad.
This business model was... OK... for a while... but as you might expect, in a world being utterly remade by financial technology (fintech) and cryptocurrency, the model is now about as relevant as, well, the telegraph.
The end isn't far off. This is a company that's ultimately dead in the water. At least, that's how forward-looking investors should read the tea leaves here.
The Writing on the Wall Reads "Cryptocurrency"
The mainstream, on the other hand, sees a financial services company that pulls in $5 billion-plus in revenue and says, "Hey, that's not too bad." The mainstream sees the stock trading for less than $20 and a price/earnings ratio under 10.
It was thinking like this that sent WU stock up more than 2% over the past two sessions, as buyers scooped up shares in higher-than-average numbers.
The mainstream is looking at Western Union's own rather belated fintech offerings which, by and large, target 14 million unbanked Americans and the $702 billion global remittances segment.
If you're not familiar, remittances are basically a fancy word for the money immigrants working legally and illegally in other countries send to support folks back home. This money can be massively important for small, struggling economies; in Nepal, for instance, remittances account for 31% of GDP, whereas in Haiti, the figure is 29%. Remittances are still important for consumers in big, developing economies like India, China, and Nigeria.
Companies like Western Union are... were... essential in making that system work.
A person can go to a Western Union counter in New York City, fill in some paperwork, and a relative halfway across the planet can go to their Western Union counter and pick up cash in whatever local currency. They'll pay a low single-digit percentage of whatever amount is being transferred as a fee.
What the mainstream is missing here is that the "official" global remittance market is shrinking - and fast. The dollar value of remittances shrank 14% between 2020 and 2021. The pandemic played a small role, but even that can't account for the dramatic remittance slowdown.
So what's happening? It's not all that mysterious; it's cryptocurrency. People are forgoing the hassle and expense of using a product like Western Union's, with all the requisite fees and documentation, and using frictionless, virtually instantaneous cryptocurrency.
Buy This Instead
Multinational consultancy Capgemini predicts as much as 45% of users who intend to remit money abroad will be using cryptocurrency to do it as soon as 2023. Ripple's XRP protocol is practically custom-built to facilitate fast, easy remittances to countries in the Middle East and Asia. Users get faster, more efficient settlement, extremely aggressive exchange rates, and lower fees than (former) mainstays like Western Union.
It's a no-brainer, and the sooner investors come to grips with this, the better off they'll be. Other financial services and fintech companies, with more diversified offerings, will also be feeling the pressure, but it's unlikely Western Union will be able to fend off the wolves in the long term. Sell Western Union stock for whatever you can get, as soon as you can.
In my daily Money Morning LIVE sessions, I've recommended trading puts on this stock, as well, and folks looking for an investment that's actually going up would do much better in cryptocurrencies. Nick Black is the source on Money Morning LIVE for cryptocurrency picks and trades, the state of the crypto markets, the best NFTs to buy (and which to avoid), and all kinds of alternative assets. You can go right here to catch Nick's most recent streams and catch him when he's on next.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.